Every projection is wrong. A good model is still invaluable because it makes your assumptions explicit, shows how much cash you need, and tells you which numbers matter most.
Structure (one spreadsheet, a few tabs)
- Assumptions / drivers: every input in one place, clearly labelled.
- Revenue build: customers, orders, price and churn, month by month.
- Costs: cost of goods sold and variable costs, marketing, tools, rent.
- Hiring plan: each role, start month and monthly cost (salary plus benefits).
- P&L summary: revenue, gross profit, operating expenses, EBITDA.
- Cash flow: opening cash, inflows, outflows, funding, closing cash, runway.
- Scenarios: conservative, base and aggressive.
Build revenue from drivers
For a subscription business:
New customers = marketing spend ÷ CAC + organic sign-ups Active customers = last month’s active × (1 − churn) + new customers Revenue = active customers × price
For a marketplace: orders × average order value × take rate. For manufacturing: units × price, limited by capacity.
Costs that founders forget
- GST and TDS cash timing, payment-gateway fees, refunds and returns.
- Salary increases and the time it takes new hires to become productive.
- Compliance, audit, legal and accounting fees.
- Working capital for inventory and receivables (Level 9, Chapter 1).
Sanity checks
- Does revenue per employee look reasonable for your sector?
- Do gross margins match comparable companies?
- Is CAC realistic as you scale (it usually rises)?
- Does the growth rate match your evidence?
Use it
- Fundraising: the model shows how much you need and what it buys.
- Decisions: “What if we hire 5 salespeople next quarter?”
- Monthly review: compare actuals with the plan and update the assumptions.
Your takeaway
Build a simple driver-based model, keep the assumptions honest, and focus on cash. Next: operations, supply chain and manufacturing basics.